October 1, 2013
Emergency management professionals say, “The plan is useless, but the planning is priceless.” There is a lesson in there for risk managers and it’s about the value of scenario modeling.
The Federal Emergency Management Administration (FEMA) conducted a study to determine the likelihood and impact of a hurricane hitting New Orleans. FEMA assembled the paramedics, fire department, emergency room doctors, parish officials, and other responders in a hotel in New Orleans for "Hurricane Pam". Their goal was to plan for the worst-case scenario. The group was given the following scenario:
- A slow moving, category-3 hurricane would directly hit New Orleans.
- The storm surge would cause the levees to top, but not break.
- The National Weather Service showed how the storm would form, what track it would take and what parishes would be effected.
These subject matter experts sat in a conference room and created the disaster plan for the evacuation and recovery for the city of New Orleans. It is amazing enough that this study happened before Hurricane Katrina, but it is down right shocking how much those professionals got right.
Based on the three scenario assumptions, these participants used their best professional estimation, in concert with each other; to create an emergency management plan to address a future catastrophe of biblical proportion. It was anything but a guess.
When I talk to risk managers about their programs, I always ask what role scenario analysis plays in their assessment process. The general consensus is that it’s a waste of time to guess what might happen. Don’t take this the wrong way, but if you’re guessing, you’re doing it wrong. Good scenario analysis takes facilitation, planning and time free from distractions. Whatever risks are identified are added to the registry and start a process of remediation. Scenario analysis will bring to light the risks associated with interdependencies that aren't apparent in the risk assessment process. It is only when the participants are all in a room together, performing the exercise of resolving the scenerio, that those interdependicies are exposed. Addressing them before the crisis is always better than learning the lessons afterward.
Remember, the plan is useless, but the planning is priceless.